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Tuesday, 16 May 2017 13:44

Malawi needs good policies for growth of MSMEs

Written by  Sylvester Kumwenda
Lora- MSMEs have potential for growth Lora- MSMEs have potential for growth

Lilongwe, May 16, 2017: The improvement and implementation of good laws, policies and institutional environment has a great potential of accelerating growth of micro, small and medium enterprises (MSMEs) in the country, an expert has said.

Enterprise development officer in the Ministry of Industry, Trade and Tourism, Mc Cartney Lora told the Malawi New Agency (Mana) in an interview that having good legal and policy frameworks is one of the crucial steps towards facilitating continuous growth of MSMEs.

“MSMEs have shown great potential but they are not operating at an optimum capacity because of general lack of an enabling environment through good policies and law,” Lora said.

He added that there is a need for MSMEs to graduate into large scale enterprises and this requires having more business owners who are visionary.

Over the years, Malawi has seen tremendous growth in a number of individuals engaged in MSMEs.

According to a 2012 Finscope study, there are around one million MSMEs in the country owned by around 760,000 people with the sector currently employing slightly over 1 million people.

But Lora emphasized that the number of businesses is what matters more than the number of owners.

“The more the businesses the more economic activities and the more the possibility of recruiting more people. It is good that there are some people who own more than one investment,” he said.

Lora cautioned that although the sector employs over a million people, the numbers are not a healthy indication of progress if viewed in a ratio way.

“Absolute numbers may look fine but this indicates how unproductive SMEs are. If the sector is to be vibrant, the same one million businesses can be in a position to create more than a million jobs,” said Lora in an emailed response.

According to Lora, the ratio of 1:1 means that the majority of businesses are micro. He said it is a fact that in any economy, micro enterprises have a big share.

But in Malawi’s case, the country has a few medium businesses, a situation he described as a missing link between small and large scale enterprises.

He said this poses a danger that in future the economy may have very few large scale businesses.

“Few medium businesses affect the number of large businesses the country may have. The sector is a pyramid where a business improvement results into change in its status or categorization.

“Small businesses are expected to graduate into medium businesses and medium businesses are expected to graduate into large businesses. We need good number of businesses at each level so that we have the right mix,” Lora said.

He added that with the high unemployment rate Malawi is facing, the SME sector is widely regarded as the engine of the economy.

“With the growing population, the sector needs to grow to absorb the labor force. Otherwise, the unemployment situation will always worsen,” he said.